issue 1 - Roland Berger

Trust DOSSIER #01
How trust drives growth
CONTROL IS OUT, TRUST IS IN. COMPANIES THAT INVEST IN TRANSPARENCY, DELEGATE RESPONSIBILITY AND RESPECTFULLY
COMMUNICATE WITH THEIR EMPLOYEES HAVE AN EASIER TIME OPENING UP NEW AREAS OF GROWTH. A PREREQUISITE FOR THE
TRANSFORMATION INTO A TRUST-BASED ORGANIZATION IS TOP MANAGEMENT’S COMMITMENT TO MAKING IT HAPPEN.
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WHEN THE FRENCH car manufacturer Renault
acquired a 36.8 percent stake in its rival Nissan for
€5 billion in the spring of 1999, the industry
looked at the Japanese company’s $17.7 billion
debt position and shook its head. Five years later,
Renault CEO Louis Schweitzer can pat himself on
the back. The former economic basket case has
transformed itself into a money-making machine
and generated almost €1.7 billion, or two-thirds, of
the French group’s €2.5 billion in earnings in the
past year. “Nissan was a good company with a
management problem,” says Schweitzer of the situation
before Renault came aboard. When asked
about the reasons for the partnership’s success,
the CEO takes care to emphasize psychological
factors, “To emerge from a crisis it’s extremely
important to demonstrate trust and confidence in
people’s abilities and good will and to give them an
opportunity to come up with the solutions themselves.”
Renault, says Schweitzer, respected the
interests and know-how of the Japanese from the
very beginning.
THE STORY ABOUT THIS “merger without merging”
(Euro Business) shows that intangible values
such as respect, transparency and confidence are
gaining even greater significance in a globalized
economy with its multinational groups and worldwide
networks. Ultimately it’s about making the
most of entrepreneurial opportunities, as happened
within a relatively short period with the
Renault-Nissan alliance. The joint platform strategy
halved the partners’ development costs while doubling
expertise. The company’s combined purchasing
power saves $500 million in costs annually. The
potential of such improvements in operating performance,
no matter how beneficial they might be
for the balance sheet, can only be fully realized if
both partners have developed a common objective
for the future of their companies and can thereby
avoid conflict and inefficiency.
SUPPOSEDLY SOFT FACTORS, such as a willingness
to change and a respectful communication
style, play key roles in implementing a parallel
strategy of both continuous restructuring and
expansion, according to the “Growth through trust”
study by Roland Berger Strategy Consultants. A
company cannot be successful if it is not prepared
to grow, explains Burkhard Schwenker, CEO of the
consulting firm. “The willingness to contribute to
high growth is created in a cultural environment
that considers performance a value and demands
outstanding personnel management,” he says.
Sought-after qualities include ambition, a thirst for
competitive endeavor, and commitment. “A company
must encourage its employees to pro-actively
pursue ambitious goals,” he adds.
ROLAND BERGER Strategy Consultants identified
transparency, quality awareness, low transaction
costs, and a culture of permanent innovation as
the basic elements of such a trust-based organization.
In its analysis of various international outperformers,
the consultancy discovered that companies
that transparently communicate values, objectives,
requirements and feedback make it easier for their
employees to identify with the company. The quality
of work and products, a major criterion for a company’s
market success, is often a direct consequence
of management’s trust in the employees’ ability to
perform. Quality control methods alone do not kick
off quality improvements. It is the comparatively
higher levels of engagement in a trust-based organization
that lower transaction costs, because they
render formal control mechanisms and monitoring
tasks unnecessary. This approach also unleashes
more creativity in a working environment where
employees feel they can try out new ideas and freely
discuss them without having to worry about having
the fruit of their labors taken from them. “A company’s
success can be increased only when employees
are ready and able to contribute their individual
expertise,” says the US innovations expert and MIT
senior lecturer Peter Senge. It is of great importance
that all involved develop a shared goal, if the joint
efforts are to succeed.
IT IS ESPECIALLY IMPORTANT to proceed in an
open and honest manner during restructuring
phases, when employees and customers will be
worrying about jobs and fulfillment of orders. “In
uncertain times, trust can only be created if management
is able to communicate hard truths while
also standing by its announcements and keeping
its promises,” says Thorsten Grenz, CEO of Mobilcom,
a German mobile communications provider.
Measures serving to create trust also include a
joint sense of accomplishment in achieving milestones.
“Once we were profitable again in the
mobile communications business we had a party
and hung a big, fat zero on the wall,” remembers
Grenz about the renewed sense of togetherness in
the company. In the meantime, Mobilcom is back
on track, growing faster than the market as a whole
and putting the squeeze on the top dogs with its
innovative mobile services.
COMPANIES THAT ARE seriously looking to create
a trust-based organization face a key issue: how
to begin? “Our discussions with management executives
have shown that the positive elements of a
growth-oriented, trust-based culture are familiar to
most companies. However, there tends to be something
missing in the execution,” says the CEO of
Roland Berger, Burkhard Schwenker. He recommends
that the transformation to a trust-based
think: act 31